National Association of REALTORS®: Commercial Lending Survey 2014
According to the first Urban Land Institute/EY Real Estate Consensus Forecast of 2014, commercial real estate fundamentals are projected to continue improving.Vacancy rates are expected to decline for office, industrial and retail properties,while availability for apartments is estimated to rise. Commercial rents are poised to rise for the four core property types in 2014 in the 1.9 percent to 3.8 percent. In 2016, rent growth is projected to range from 2.2 percent to 3.6percent.On the investment front, sales volume is forecast to exceed the 2006 volume by2016, totaling $430 billion. The ULY/EY forecast estimates that Institutional assets will offer total returns of 9.4 percent in 2014, and moderate to around 8.5 percent by 2016.
As a significant portion of the data underpinning ULY/EY’s forecast is aggregated at the top end of transactions — above $2.5 million — it points to a brighter commercial environment, especially for top-tier markets. With 90 percent of commercial REALTORS® managing transactions valued at or below $5 million, and mainly located in secondary and tertiary markets, the 2014 Commercial Real Estate Lending Survey shines the spotlight on a significant segment of the economy which tends to be somewhat obscured.Five years after the Great Recession, lending conditions in REALTOR® marketsshow signs of sustainable recovery. With commercial real estate fundamentals and investment prices on a solid upward trend, lending conditions eased as financing sources broadened in 2014.
The changes in capital liquidity are a welcome sign, pointing to improvements across a wider geographical range. While cash accounts for a third of sales, the main sources of capital for commercial REALTORS®’ clients are local and regional banks, along with private investors.
The incidence of failed transactions due to lack of financing diminishes with each passing year, yet lenders’ underwriting standards remain the principal obstacle to sales. REALTORS® cite the uncertainty brought about by existing and proposed legislative and regulatory initiatives as the most relevant cause of bank capital for commercial real estate.
By: Research Division (National Association of REALTORS®)
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